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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Monopolistic competition long-run equilibrium
Marginal Cost (MC)
Variable inputs
Dead Weight Loss
2. AVC = TVC/Q
Price discrimination
Normal Goods
Oligopoly
Average Variable Cost (AVC)
3. The ability to set the price above the perfectly competitive level
Market power
Economics
Allocative Efficiency
Surplus
4. A firm that has market power in the factor market (a wage-setter)
Market power
Necessity
Monopsonist
Price Ceiling
5. The price of a good measured in units of currency
Absolute prices
Luxury
Monopsonist
Accounting Profit
6. Ed < 1
Price inelastic demand
Profit Maximizing Resource Employment
Excess Capacity
Income Elasticity
7. When firms focus their resources on production of goods for which they have comparative advantage
Relative Prices
Total Product of Labor (TPL)
Specialization
Luxury
8. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Economies of Scale
Incidence of Tax
Relative Prices
Constant cost industry
9. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Demand for Labor
Perfect competition
Monopsonist
Resources
10. The imbalance between limited productive resources and unlimited human wants
Scarcity
Complementary Goods
Substitution Effect
Natural Monopoly
11. Exists at the point where the quantity supplied equals the quantity demanded
Relative Prices
Market Equilibrium
Luxury
Production function
12. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Income Elasticity
Natural Monopoly
Allocative Efficiency
Perfectly elastic
13. Ei = (%dQd good X)/(%d Income)
Collusive oligopoly
Perfectly inelastic
Total Revenue
Income Elasticity
14. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Necessity
Positive externality
Economic Growth
Allocative Efficiency
15. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Marginal Product of Labor (MPL)
Four-firm concentration ratio
Incidence of Tax
Negative externality
16. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Perfect competition
Price floor
Long Run
Positive externality
17. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Accounting Profit
Law of Diminishing Marginal Utility
Fixed inputs
Marginal Benefit (MB)
18. Entry of new firms shifts the cost curves for all firms upward
Spillover benefits
Increasing Cost Industry
Constant cost industry
Total Fixed Costs (TFC)
19. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Unit elastic demand
Public goods
Private goods
Productive Efficiency
20. Exists if a producer can produce a good at lower opportunity cost than all other producers
Explicit costs
Comparative Advantage
Positive externality
Perfectly elastic
21. A good for which higher income decreases demand
Economic Growth
Average Fixed Cost (AFC)
Perfect competition
Inferior Goods
22. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Law of Diminishing Marginal Utility
Non-collusive oligopoly
Marginal Productivity Theory
Inferior Goods
23. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Average Product of Labor (APL)
Diseconomies of Scale
Cartel
Monopsonist
24. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Private goods
Marginal tax rate
Explicit costs
Economic Growth
25. The most desirable alternative given up as the result of a decision
Total Revenue
Opportunity Cost
Profit Maximizing Rule
Derived Demand
26. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Unit elastic demand
Economic Growth
Law of Supply
Law of Demand
27. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Economic Profit
Perfectly competitive long-run equilibrium
Resources
Consumer surplus
28. Ed > 1 - meaning consumers are price sensitive
Long Run
Law of Demand
Marginal Productivity Theory
Price elastic demand
29. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Law of Diminishing Marginal Utility
Scarcity
Income Effect
Oligopoly
30. The difference between total revenue and total explicit and implicit costs
Collusive oligopoly
Accounting Profit
Average Variable Cost (AVC)
Economic Profit
31. Exists if a producer can produce more of a good than all other producers
Average Total Cost (ATC)
Absolute prices
Complementary Goods
Absolute Advantage
32. All firms maximize profit by producing where MR = MC
Relative Prices
Marginal tax rate
Profit Maximizing Rule
Resources
33. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Determinants of Supply
Law of Demand
Scarcity
Shortage
34. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Price elasticity
Total Revenue Test
Excise Tax
Average Fixed Cost (AFC)
35. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Break-even Point
Utility Maximizing Rule
Economics
Natural Monopoly
36. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Collusive oligopoly
Economics
Marginal Product of Labor (MPL)
Marginal Cost (MC)
37. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Constant cost industry
Comparative Advantage
Marginal Product of Labor (MPL)
Shutdown Point
38. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Marginal Revenue Product (MRP)
Average Variable Cost (AVC)
Determinants of Labor Demand
Collusive oligopoly
39. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Excess Capacity
Economic Profit
Perfectly competitive long-run equilibrium
Economies of Scale
40. ATC = TC/Q = AFC + AVC
Relative Prices
Price floor
Resources
Average Total Cost (ATC)
41. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Law of Demand
Law of Increasing Costs
Monopoly
Determinants of Labor Demand
42. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Substitute Goods
Normal Profit
Subsidy
Profit Maximizing Resource Employment
43. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Least-Cost Rule
Producer surplus
Normal Profit
Price floor
44. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopoly long-run equilibrium
Marginal Revenue Product (MRP)
Determinants of Supply
Law of Supply
45. Ed = 1
Unit elastic demand
Price discrimination
Relative Prices
Income Effect
46. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Absolute prices
Profit Maximizing Rule
Average Fixed Cost (AFC)
Implicit costs
47. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Average Fixed Cost (AFC)
Economics
Absolute Advantage
Specialization
48. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Spillover costs
Relative Prices
Total variable costs (TVC)
Utility Maximizing Rule
49. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Marginal Resource Cost (MRC)
Utility Maximizing Rule
Absolute prices
Market Economy (Capitalism)
50. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Price discrimination
Price elastic demand
Allocative Efficiency
Marginal Analysis